UK PMI manufacturing finalized at 47 in Jan, some shoots of positivity developing

    UK PMI Manufacturing was finalized at 47.0 in January, up from December’s 31-month low of 45.3. S&P Global noted that output and new orders fell across all three product categories. Input price inflation eased to 27-month low.

    Rob Dobson, Director at S&P Global Market Intelligence, said:“There were some shoots of positivity developing, however. Rates of contraction are generally lower than before the turn of the year, a possible sign that we may be past the worst of the downturn in industry.

    “Cost inflation also eased further, while supply chain delays were the least pronounced for three years. Manufacturers’ confidence is also reviving from recent lows, hitting a nine-month high, though the mood continued to be darkened by concerns about inflation and the possibility of recession.”

    Full release here.

    Australia AiG construction rose to 57.6, healthy leap in activity

      Australia AiG Performance of Construction rose 4.3 pts to 57.6 in October. Looking at some details, activity rose 15.4 to 65.2. Employment dropped -0.2 to 56.8. New orders dropped -0.2 to 58.7. Supplier deliveries dropped -1.3 to 41.3. Input prices dropped -1.2 to 97.2. Selling prices dropped -0.5 to 78.3. Average wages dropped -1.5 to 75.1.

      Ai Group Head of Policy, Peter Burn, said: “The healthy leap in activity levels across the Australian construction sector in October is a taste of what is expected to be a strong rebound for the broader economy over the next few months as New South Wales, Victoria and the ACT, liberated from COVID restrictions, catch up with the rest of the country and as barriers to the movement of people within Australia are removed.”

      Full release here.

      UK PM May: Chequers is the only Brexit plan on the table

        UK Prime Minister Theresa May’s spokesman said that “Chequers is the only plan on the table which will deliver on the will of the British people while avoiding a hard border in Northern Ireland. The prime minister is working hard to secure a deal and hopes all MPs (members of parliament) will be able to support it.”

        And, May will hold a cabinet meeting on Thursday to discuss preparation on “no-deal” Brexit.

        Japan CPI core slowed to 0.5%, further away from BoJ’s target

          Japan CPI core (all items less fresh food) slowed to 0.5% yoy in August, down from 0.6% yoy, matched expectations. All items CPI slowed to 0.3% yoy, down from 0.5% yoy. CPI core-core (all items less fresh food and energy) was unchanged at 0.6% yoy.

          The CPI core reading moved further away from BoJ’s 2% inflation target. It’s expected to stay subdued in the coming months as as lower mobile phone service fees and education costs weigh on prices. Additionally, the upcoming sales tax hike (from 8% to 10%) in October may further hit consumer sentiment and weigh on underlying inflation.

          Fed Clarida: It’s a symmetric inflation objective around 2%

            Fed Vice Chair Richard Clarida said in a Bloomberg interview that “we have a symmetric objective around 2 percent.” And he emphasized that “two percent is not meant to be a ceiling”. He added that “we’ve operated below 2 percent, we could operate somewhat above 2 percent, depending on the shocks.”

            Clarida also said the US economy is in good shape with solid outlook. And, the current monetary policy framework is serving Fed well.

            Japan: Industrial production appears to be pausing for picking up

              In June economic report, Japan’s government said “industrial production appears to be pausing for picking up.” That’s a downgraded assessment from May’s “industrial production shows movements of picking up.” Exports continued to be “almost flat”.

              It reiterated that “full attention should be given to the downside risks due to rising raw material prices, supply-side constraints and fluctuations in the financial and capital markets while there are concerns regarding the effects of lengthening the state of affairs of Ukraine and suppression of economic activities in China.”

              Nevertheless, for the short-term, the economy is “expected to show movements of picking up, supported by the effects of the policies while all possible measures are being taken against infectious diseases, and economic and social activities proceed to normalization”.

              Full release here.

              US Senate to hold competing votes to end government shutdown

                The US Senate will hold two competing votes on Thursday as effort to end the record government shut down. Trump’s plan, which includes USD 5.7B for border wall will be voted on. Also, Democrat’s proposal, to reopen government through February 8, will also be voted on. It’s seen as a concession by Senate Majority Leader Mitch McConnell who previously refused to vote on a bill that Trump would veto.

                Trump includes a provisional three-year work permits for the youngsters under Deferred Action for Childhood Arrivals program as bargaining chip. But his plan is still likely to be voted down as Democrats have open rejected to compromise on the issue.

                The Democrats could gain enough support from Senate Republicans rebels to vote for their proposal, which was already pass in the House. However, even so, Trump will likely veto even if the Democrat’s bill is passed in the Senate. The Democrats are way short of two-third majority to override Trump’s veto.

                So, the shutdown might still extend beyond Thursday.

                New Zealand building consents rose 5.7% mom in Feb

                  New Zealand building consents rose 5.7% mom in February verusus 0.0% mom in January.

                  Key facts from noted in the release:

                  • The seasonally adjusted number of new dwellings consented rose 5.7%.
                  • In the year ended February 2018, 31,245 new dwellings were consented, up 3.6%.
                  • The annual value of building work consented was $20.4 billion, up 9.9% from the February 2017 year.

                  Regional numbers of new dwellings consented in the February 2018 year were:

                  • Auckland – up 10% to 11,052
                  • Waikato – down 1.2% to 3,469
                  • Wellington – up 20% to 2,432
                  • Rest of North Island – up 0.6% to 5,794
                  • Canterbury – down 14% to 4,962
                  • Rest of South Island – up 17% to 3,532 – driven by Otago

                  All building consents

                  Including alterations, the value of all building work consented in the year ended February 2018 was $20.4 billion, comprising $13.7 billion of residential work and $6.8 million of non-residential work. The annual total value rose 9.9 percent when compared with the February 2017 year.

                  Full release here.

                  BoJ Suzuki: Monetary easing will last even longer due to pandemic

                    BoJ board member Hitoshi Suzuki said “with the economy having lost momentum to achieve our price target due to the pandemic, our monetary easing will last even longer”

                    He noted that the benefits of the central bank’s ultra-easing monetary policy still outweighs the costs. however, “If a second and third wave of infection hits Japan, financial institutions’ credit costs could balloon to levels near those hit after collapse of Lehman Brothers” during the 2008/09 global financial crisis.

                    UK PMI construction dropped to 54.6, speed of recovery lost momentum

                      UK PMI Construction dropped to 54.6 in August, down from July’s 58.1. Markit said subdued order books held back output growth. House building remained the best performing category. Business expectations reached six-month high on hopes of a boost from infrastructure work.

                      Tim Moore, Economics Director at IHS Markit: “The latest PMI data signalled a setback for the UK construction sector as the speed of recovery lost momentum for the first time since the reopening phase began in May…. Another month of widespread job shedding highlighted the ongoing difficulties faced by UK construction companies, with order books often depleted due to a slump in demand from sectors of the economy that have experienced the greatest impact from the pandemic.”

                      Full release here.

                      German Ifo business claims dropped to 97.5, lowest since Nov 2014

                        Germany Ifo Business Climate dropped to 97.5 in June, slightly down from 97.9 and below expectation of 97.5. Though, that’s still the lowest level since November 2014. Ifo Expectation index dropped to 94.2, down fro 95.3 and missed expectation of 04.6. Current Assessment index rose to 100.8, up from 100.6 and beat expectation of 100.3.

                        Ifo President Clemens Fuest noted: “Companies have grown increasingly pessimistic about the coming months. However, their assessment of the current business situation improved marginally. The German economy is heading for the doldrums.”

                        Looking at the details, Manufacturing index dropped again from 3.9 to 1.5. It’s been falling for over a year. Services index dropped from 21.0 to 20.0. Construction index dropped from 24.3 to 22.9. But Trade index improved from 5.4 to 7.9.

                        Full release here.

                        Euro remains firm against Dollar and Yen after the release. But EUR/CHF is mildly lower. For now EUR/CHF’s consolidation from 1.1056 is still in progress and could extend for a while. But a break of 1.1056 is expected eventually to resume larger down trend.

                        ECB de Galhau: The key question is if slowdown is temporary or more durable

                          ECB Governing Council member Francois Villeroy de Galhau said in a El Pais newspaper interview over the weekend that the central bank will scrutinize incoming data to decide whether to hike after this summer.

                          He said “the key question will be if the slowdown is temporary — with a bounce-back during this year — or more durable.” For now, there is resilient domestic demand in Germany, France and Spain. And that kept recession risk low even though outlook was clouded by protectionism and Brexit.

                          And de Galhau also noted that there was strong convergence of views within ECB about the sequencing of the next policy steps, as well as the flexibility about timing.

                          Fed Bowman looking at very robust growth and tapering this year

                            Fed Governor Michelle Bowman said yesterday, “even though some of the recent data may have been less strong than we expected, we are still looking at very robust economic growth.”

                            “If the data comes in as I expect that it will, it will likely be appropriate for us to begin the process of scaling back our asset purchases this year,” she added.

                            “It is important not to take too much signal from a single data point as we might have seen last week from the labor market,” Bowman said.

                            ECB Coeure: Growth to return in H2, no grounds for overly gloomy thoughts

                              ECB Executive Board Member Benoit Coeure said in a newspaper interview that policymakers expected “growth to return in the second half of the year”. He told German daily Frankfurter Allgemeine Zeitung “there are no grounds for overly gloomy thoughts”. However, he admitted for now “it is very uncertain how long and how strong the downturn will be.”

                              On monetary policy, Coeure sees no argument for tiered deposit rate. He urged banks to focus on their own costs, rather than blaming ECB’s negative rate for lower profits. Meanwhile, currently, markets are pricing in no rate cut until at least 2021. Coeure warned “we are not tied to such market expectations; they are an important input, but we are not led by them.” He added market pricing are merely reflecting “an assessment of the downside risks which is different to that of the Governing Council”.

                              ECB Villeroy: Rate hikes are over, but that doesn’t mean a quick cut

                                ECB Governing Council member Francois Villeroy de Galhau, in an Ecorama radio interview, stated, “Barring shocks or surprises, rate hikes are over. However, he emphasized that “doesn’t mean a quick rate cut.” He further clarified, “We are not guided by a calendar, we are guided by data,” and called for “confidence and patience.”

                                Villeroy also commented on the pace of disinflation, noting it is occurring “a little quicker than expected,” largely due to the faster-than-anticipated transmission of monetary policy. He concluded, “In other words, monetary policy is effective.”

                                Madis Muller, another ECB Governing Council member, expressed the view that markets might be “a bit optimistic” about the prospects of early rate cuts. This sentiment was echoed by Robert Holzmann, who stated that there were no discussions about rate cuts among policymakers. Holzmann also mentioned that a majority of the Council members perceive upside risks to inflation.

                                NASDAQ cleared one projection hurdle, targets 16582 next

                                  US stocks surged to new record highs overnight despite Fed’s tapering announcement. NASDAQ’s break of 61.8% projection of 13002.52 to 15403.43 from 14181.69 at 15665.44 is a sign that it’s in another acceleration phase. For now near term outlook will stay bullish as long as this week’s low at 15470.74 holds. Next target will be 100% projection at 16582.59.

                                  Japan’s Q1 GDP contracts -0.5% qoq, weak consumption and capital spending

                                    Japan’s GDP contracted by -0.5% qoq in Q1, slightly worse than the expected -0.4% qoq decline. On annualized basis, GDP fell by -2.0%, missing forecast of -1.5% drop.

                                    Private consumption, which makes up over half of the Japanese economy, decreased by -0.7%, exceeding anticipated -0.2% decline. This marks the fourth consecutive quarter of decline, the longest streak since 2009.

                                    Capital spending fell by -0.8%, slightly more than the expected -0.7% decrease. This was the first decline in two quarters.

                                    Exports declined by -5.0%, despite ongoing support from inbound tourism, while imports fell by -3.4% amid reduction in energy imports. The trade figures reflect a broader slowdown in global demand, which is impacting Japan’s export-driven economy.

                                    US PPI up 0.2% mom, 1.7% yoy in Aug

                                      US PPI rose 0.2% mom in August, matched expectations. PPI services rose 0.4% mom while PPI goods was unchanged. PPI less foods, energy, and trade services rose 0.3% mom.

                                      For the 12 month period, PPI advanced 1.7% yoy, slowed from 2.1% yoy. PPI less foods, energy and trade services moved up 3.3% yoy.

                                      Full US PPI release here.

                                      Davis: May is good PM but the Brexit plan is a dangerous strategy

                                        Ex-Brexit Minister David Davis told BBC Radio that PM Theresa May’s Brexit plan had a “number of weaknesses” and gives away “too much” to the EU. He called that a “dangerous strategy”. And he said he was clear after Friday’s that that he was the “odd man out”.

                                        Nonetheless, Davis also said he “won’t be encouraging people” to mount a leader change in the UK and added that “I like Theresa May, i think she is a good PM”. And he didn’t expect others ministers to follow him to resign. He said “the simple truth is people can only make these decisions of conscience, decisions of principle by themselves, in their own minds,”and you can’t make the decision for somebody else and you can’t offload it on somebody else.”

                                        UK Foreign Minister Hunt said China offered talks on post Brexit FTA

                                          New UK Foreign Minister Jeremy Hunt met with China’s Foreign Minister Wang Yi in Beijing today. After the meeting, Hunt said China made an offer to “to open discussions about a possible free trade deal done between Britain and China post Brexit”. And he added that “that’s something that we welcome and we said that we will explore.” Wang didn’t mention the free trade talks directly. But he said both countries had “agreed to proactively join up each others’ development strategies, and expand the scale of trade and mutual investment”.

                                          Separately, Wang said that “the responsibility for the trade imbalance between China and the United States lies not with China.” And he cited the global role of the US Dollar, low saving rates, high level of consumption and US restrictions on high tech exports as some of the reasons for the imbalances. He also reiterated the stance that “China does not want to fight a trade war, but in the face of this aggressive attitude from the United States and violation of rights, we cannot but and must take countermeasures.”